'NYT' quotes Israeli official as saying US "playing with fire"; Kerry says US still committed to helping gov't.

WASHINGTON – The US has decided to alter its military aid to Egypt, the State Department said on Wednesday, after Sunday’s clashes in the Arab world’s most populous nation resulted in the deaths of 57 people.

The US will maintain military aid to Egypt tied by contracts with American defense firms, but will "continue to hold the delivery of certain large-scale military systems and cash assistance to the government pending credible progress toward an inclusive, democratically elected civilian government through free and fair elections," Jen Psaki, State Department spokeswoman, said in a statement.

The State Department clarified, however, that it would continue to give Egypt support for counter-terrorism efforts in the Sinai peninsula, which borders Israel.

The decision to curtail aid does not mean Washington is severing ties with the country, US Secretary of State John Kerry said on Thursday.

"The interim government understands very well our commitment to the success of this government, which we want to see achieve, and by no means is this a withdrawal from our relationship or a severing of our serious commitment to helping the government," Kerry told reporters shortly after arriving in Malaysia.

"We're talking hundreds of millions of dollars in military assistance," one senior administration official said on Wednesday, in addition to the complete halt of $260 million in cash assistance to the interim government.

"Most of the economic assistance" earmarked for civilian purposes and toward the private sector will continue, another aide said.

"This decision just underscores that the United States will not support actions that undermine our principles," the official said. "This is a way of expressing that."

US Secretary of Defense Chuck Hagel explained the change in policy in a 40-minute phone call with Egyptian General Abdel Fattah el-Sisi.

"Both wanted to take the steps needed to resume the assistance," the official said, adding that the two men emphasized the need to reinforce security in Sinai and Egypt's border with Israel.

The official declined to comment on whether el-Sisi objected to the cuts.

Meanwhile Egyptian Foreign Ministry spokesman Badr Abdelatty criticized the decision, saying that "Egypt will not surrender to American pressure" and assuring that it is "continuing its path towards democracy as set by the roadmap."

Clashes throughout Egypt have led to significant bloodletting.

The detainment of former Egyptian president Mohamed Morsi by the Egyptian military has been condemned by the US as a “politicized arrest.”

The State Department says the US has “determined not to make a determination” whether the July 3 event was a coup. US law would require aid be cut if such a determination was made.

While the US has said that foreign military assistance to Israel and other important regional allies would be jeopardized by the ongoing shutdown of the federal government in Washington, State Department deputy spokeswoman Marie Harf said that the timing of the announcement on Egypt policy was “completely coincidental.”

Congresswoman Nita Lowey (D-NY), Ranking Democrat on the House Appropriations Committee, said following the announcement regarding aid to Egypt:

"Stability in Egypt is of critical importance to security in the region and United States interests. I am working with the Administration to understand how this aid suspension can be accomplished without harming efforts to fight terrorism or promote a transition to democratic governance. I encourage the Administration to consult closely with Congress on these issues moving forward."

US Senator Robert Menendez (D-NJ), Chairman of the Senate Foreign Relations Committee, expressed support for the cut to Egypt's military aid.

“Our relationship with Egypt is bound by decades of shared concerns to ensure regional stability, maintain the Camp David peace accords, and cooperate on counter-terrorism and border security efforts. Assistance to Egypt that supports these common goals should continue,” said Menendez. “But ongoing violence in Egypt is troubling, shows no signs of abating, and given these worrisome developments, a pause in assistance is appropriate until the Egyptian government demonstrates a willingness and capability to follow the roadmap toward a sustainable, inclusive and non-violent transition to democracy."

Prior to the official announcement of the aid withdrawal on Wednesday, The New York Times quoted an Israeli official as warning that the US was "playing with fire."

The official reportedly stated that US aid to Cairo is part of Israel's 1979 peace treaty with Egypt and is also an important element of the United States' standing in the Arab world.

"If America is seen to be turning its back on Egypt, an old ally, how will it be seen? People will see it as the United States dropping a friend,” the Times quoted the official a saying.

The Wall Street Journal also quoted a senior Israeli official, who said the US dropping its aid to Egypt would have dismal consequences on the entire region.

"It's a sign to the whole Middle East that America is stepping back and is not interested anymore. It's going to affect America's position from Morocco to Saudi Arabia," the Journal quoted the senior official as saying.

Meanwhile an American diplomat told the Journal that the United States does not view the move as a disengagement.

"The US isn't withdrawing from Egypt if it cuts aid to the military. It is just engaging differently, perhaps supporting a policy that Israel and Saudi Arabia may not agree with, but it's not fair to say it's disengaging," the diplomat told the Journal.

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